Albanese backs down on renewables rule for AI datacentres
Anthony Albanese has abandoned his government's demand that new AI datacentres should entirely be powered with renewable energy, according to reports, in what experts described as a "speedy settlement" to deliver a datacetre boom in Australia.
The climbdown marks a significant reversal for the prime minister, coming just weeks after Energy Minister Chris Bowen threatened to use constitutional powers to override states resisting the renewables mandate, rules that had been slated for federal legislation in early 2027.
Wednesday's national cabinet meeting in Sydney ended without a full resolution, but Albanese signalled exemptions would be made for jurisdictions with state-owned power systems and a surplus of fossil fuel generation capacity, The Guardian reported.
NT Chief Minister Lia Finocchiaro said she had secured approval at the meeting to draw on gas from the Beetaloo basin.
"Today's deal recognises the Beetaloo basin will be online within days, we are not part of the national electricity market and we have a Territory-owned generation, transmission and distribution system," she said in a statement.
"Our focus remains on affordability and reliability of electricity for Territorians above all else."
Queensland Premier David Crisafulli also welcomed the flexibility, pointing to his state's public ownership of its energy network as justification for different rules.
"In the state of Queensland, we've got a really big point of difference, and that is that we own distribution, transmission, generation, and that enables us to control that energy mix, and we've done that well," he said as quoted by The Guardian.
A move for datacentre boom
ABC political correspondent David Speers wrote in an analysis that the prime minister's concession reflects a calculated choice.
"He doesn't want a drawn-out battle, potentially involving a Commonwealth override, when in his mind, data centres will end up being powered largely by renewables anyway," Speers wrote in an analysis.
"He is instead prioritising a speedy settlement of nationally consistent rules to ensure investment can proceed."
Despite the concessions, Albanese insisted the commonwealth retained authority to set binding national standards and would press ahead with legislation.
"The commonwealth will legislate, and we have the power under the corporation's power to do so," he said. "I'm very confident that we'll move forward with every single jurisdiction making a difference."
Speers wrote that the energy dispute shows a rare moment of agreement between both Labor and the Coalition, who are both eager to see data centres built in Australia.
That consensus sets Australia apart from the United States, where the issue has divided politicians on both sides, with some Republican-led states moving to slow or halt approvals even as Donald Trump champions the economic promise of the sector, Speers noted.
According to the political correspondent, Albanese has framed his plan around protecting ordinary Australians from any negative consequences of the boom, promising no household cost increases, and mandatory standards on energy, water, and land use.
But the prime minister still faces the harder task of making the case for what Australians will actually gain from hosting these facilities, Speers wrote.
Leaders signed a communique committing to further consultation on those mandatory standards. The meeting came after the Australian Energy Market Operator forecast that datacentre power consumption would increase seven-fold over the next decade, representing 13% of national grid demand by 2035–36, up from three per cent today.
Australia should 'learn from other regions'
Ehsan Noroozinejad, an associate professor and urban transformations researcher at Western Sydney University, said in an article for The Conversation that the state-by-state carve-out approach could work "technically."
Noroozinejad said, citing the Australian Energy Market Operator, that "batteries, pumped hydro and gas can act as firming technologies" when renewable generation drops.
But he warned the exemptions must not be allowed to undermine Australia's emissions reduction goals or push up household energy bills.
Noroozinejad said the new standards left "some major regulatory gaps, particularly when it comes to individual states," including uncertainty over whether the rules would apply to the more than 250 datacentres already operating across the country or only to future projects.
He pointed to the European Union's requirement that major datacentres report their energy and water use, and Ireland's practice of weighing grid demand and renewable energy goals when assessing new proposals.
"To properly enforce our new standards, Australia must learn from other regions," he stated.
Community engagement needed to be built into the approvals process from the outset, he further argued, to ensure that datacentre projects will deliver "concrete benefits, such as shared energy infrastructure and structured apprenticeships, not just increased capacity."
"Strong enforcement is key to ensuring every project keeps energy costs low, protects the environment, and offers lasting benefits for local communities," Noroozinejad said.
